A Slower Market for Sellers Is Also a Slower Market For Buyers

In a slower real estate market most buyers assume a house will be around for a while. No need to rush out and make an offer, lets just take our time and see what happens. Before making an offer to purchase, a home buyer has many factors to consider. A slower market will tend to make buyers more contemplative.

1. Is there a chance the price may go down?
2. How motivated is the seller?
3. If I wait a few weeks, what will the interest rate be?
4. With the new lending requirements, I do not have enough for a down payment.
5. I just cannot make up my mind between this house and the one down the street.
6. No sense of urgency, time is on our side.
7. I don’t know if now is a good time to buy.
8. Prices haven’t really come down much.

Now versus Then

A few years ago when everything in the housing market was selling, buyers only had one thing on their mind. That was “make an offer today” because there was a good chance a house may not be around tomorrow or it may have multiple offers. Then the price could go up. Today’s market is much different. Too many things to consider. Just like going to TGI Friday’s for dinner, too many items on the menu and it is hard to make a decision.

In our current market environment, properties that offer value are selling and selling fairly quickly. Buyer’s need to recognize value when it presents itself. Problem is in this market people read the news and think that there is that one hot deal out there and this could be that motivated seller willing to accept a 25% discount. Even though the market is decidedly different than 18 months ago, many similarities exist. Many psychological similarities. Until you loose out on a couple of offers you may not understand what it takes to produce a winning bid. This is true in an up or down market.

People may tend to view and absorb information from a single perspective. How does it impact them and what does it mean for their current situation. Suffice it to say that if you are not currently in the housing market, meaning you are not looking to buy or sell, you may not be concerned if prices are rising or falling. You are probably more concerned with the price of gasoline since this impacts your budget and you have to deal with it everyday, than you are if home prices are down 10%.

Market Momentum Has Shifted

However, if your intention is to buy or sell property, chances are you have a much different perspective than your counterpart on the other side of the welcome mat at the front door. Home buyers recognize that the momentum has shifted. They can be more patient, more demanding and more selective in their approach to buying a home. If they can’t come to an agreement with a seller who is willing to meet them or their terms, they can go somewhere else. There are plenty of homes for sale and apparently only a few buyers willing to make offers.

Home sellers on the other hand are convinced they are the exception. Despite the negative news being reported it somehow doesn’t apply to them. Convinced that someone looking at their property will see its meticulous care and amenities, they will pay more and will do so quickly.

Market Specifics, Not Generalizations

In an up or down market, one thing is generally consistent, quality properties will usually maintain their value and are less likely to experience wild market swings in value. So the price declines we are reading about in Riverside County are probably not applicable here in Pasadena. Many of the neighborhoods in Pasadena while certainly not gaining in value have experienced very little price deterioration. Sometimes buyers are surprised that sellers do not seem eager to accept an offer that is 5-7% below the asking price. In a market where there seems to be little consensus, it can be hard to find acceptable territory on which folks can agree.

In a slower market it is harder to determine the value of a property. A seller’s motivation becomes a much more tangible ingredient especially if reinforced by financial obligations. Buyers seem to be basing many of their offers on the premise that today’s sellers are much more motivated and are therefore much more likely to accept an offer that may be below what the area may indicate that it is worth. If patience and time are on your side, then finding that special motivation may be worth waiting for.

I don’t think anyone would argue that the pendulum has swung and it is now a buyer’s market. Although sellers had the ball for 5-6 years, some of them are just very reluctant to give it up.